TURKEY - Energy & Mining
President & Chairman, Sabancı Energy Group & Enerjisa
Selahattin Hakman was born in Istanbul in 1953. He graduated from Karlsruhe Technical University as an Electrical Engineer (MSc). He started his career at Siemens AG Germany in 1980, and in 1984 joined Siemens Turkey, where he worked as the Director of the Power Generation Group for 12 years and of the Communication Systems Group for two years. In 2006, he joined Sabancı Holding as the President of the Energy Group.
The liberalization of the Turkish power markets began in 2001 with the introduction of the electricity market law, while we launched our own investments in this sector at the end of 2006. When we began to invest, we had expectations in terms of the further liberalization and privatization of the market. The Turkish power sector is moving ahead into a fully liberalized scheme; however, there are steps that remain to be taken. An important step has already been included in the revision of the electricity market law, approved by parliament in spring 2013, which is the establishment of an energy exchange. This exchange will enable the trading of futures and derivatives, which will bring the Turkish market to a European level in terms of liberalization. This power exchange will be established with private sector participation. This is also an important step as it will be a joint public-private entity. This will contribute to the transparency of the market and secondly to providing references for future pricing in the market, which is important from an investor’s perspective in terms of visibility of the market’s future. All distribution in Turkey is already in private hands, and the privatization of the large-scale state-owned generation assets began in 2013. There are also a number of important thermal power plants, which have already been privatized. Now, there are four further projects on the agenda, which will also contribute to the liberalization of the market. Ownership-wise, the state share of generation is at around 40%, which is an excellent achievement. On the supply side, the state market share is still at 60%, which needs to decrease to spur competition. We started our investments in the generation segment in the expectation of a competitive, liberal market, and we are clearly getting there. Today, Turkey has the capacity to cover its power demand. The fundamental characteristic of the Turkish power market is increasing demand. In 2013, for various reasons, such as the weather, the demand for power decreased. In the meantime, the Turkish sector has achieved an installed capacity that covers demand for 2014. Historically, over past decades, Turkey has always faced electricity shortages due to a capacity shortfall; however, the liberalization of the market attracted such investment volumes that we do not face this problem today. Turkey annually requires around 4,000 MW to 5,000 MW. With the necessary investments into transmission network and so on, this is roughly an investment need of around $10 billion a year. In order to secure this, the market needs to liberalize and privatize further.
Any investor looks for a growing market. There is also new capacity coming online in Turkey, both in thermal energy and renewables. And it is increasingly efficient; we are a pioneer in this. Our existing combined-cycle plant is the most efficient in Turkey. Our coal plant, set to become the most efficient among its peers, will come online in 2015. With regard to our hydro and wind plants, we are aiming for the highest efficiency possible. New technologies will render us more competitive in this growing market. Nowadays, there is an overcapacity in the market, which pressures profitability. However, in a growing market, overcapacity is a problem for a year or two before supply gets tight again. Pursuing further liberalization steps is essential in order to sustain secure and competitive growth of the electricity market.
This company is, and will remain, one of the leading players in the Turkish power market in terms of size. Beyond our 5,000 MW target, which we will have up and running by 2017, we target a capacity of 7,500 MW by 2020, which will then respond to more or less 10% of overall generation. We already cover 10% of the Turkish market with our sales and supply, but not with generation alone. We are also aiming to have an IPO of Enerjisa probably in the second half of 2016, although this depends on prevailing market conditions.
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